Who can apply for a New Type CVA?
Definition of a small company - Companies Act 2006 Sections 382 & 465
The answer is that only "a small company" may apply for a Company Voluntary Arrangement (CVA) with a moratorium. A moratorium is a freeze on creditors actions from the time a CVA is proposed and right up to the day of creditors meeting that the CVA proposal is considered by creditors. Thereafter if the creditors approve the CVA at that creditors meeting the freeze on creditors actions automatically continues.
A "small" company is defined by Sections 382 and 465 of the Companies Act 2006 as one which satisfies two or more of the following requirements:
- Turnover - not more than £5.6 million
- Balance sheet total - not more than £2.8 million
- Number of employees - not more than 50
This begs the question "why can't larger companies have a CVA with a moratorium period?" The answer is that larger companies can achieve the same objective by applying for an "Administration Order".
Administration orders are dealt with at a different part of this website. There is more formality and cost attached to an administration and that is why the administration process may be more suitable for the larger company.
Conclusions:
If you are a director of a "small" company you could apply for either:
- An old type CVA
- or a new type CVA
- or an administration order
If you are a director of a larger company you could apply for either:
- An old type CVA
- or an administration order
For free company insolvency advice on whether you should choose administration or one of the two types of CVA please contact us.
